Building Financial Models Course

Financial modeling demands a logical, consistent approach. This workshop builds a financial analysis and a valuation model through a series of logical and practical stages.

Upon completion, delegates will have a comprehensive understanding of advanced modeling, as well as how each technique can practically be applied through:

• Building a financial model from a blank sheet
• Designing models which minimize errors
• Writing models which can be maintained and augmented in the future
• Developing models with advanced techniques such as risk, sensitivity, and optimization and forecasting.

Course Contents

Day One

Financial Analysis and Valuation

• Different approaches to valuation
• Financial analysis and valuation framework model
• Useful Excel methods, features and techniques
• Common pitfalls and mistakes in Excel.

Alternative Model Review

• Model Structure and Planning
• Model design and structure – key stop
• Planning the equity valuation model
• Required sheets, calculations and DAYs
• Five essential auditing techniques.

Completing and Checking the Financial Analysis/Valuation Template

• Adding Cash Flows and Ratios
• Structured model with a menu and accounting statements
• Calculating key financial ratios

Day Two

Adding Cash Flow and Ratios to Template

• Non-cash Flow Valuation
• Non-cash flow methods
• Accounting methods
• Dividend discount models
• Market-based methods – EPS and multiples
• Peer groups
• Calculating Accounting and Market Value on Template.

Forecasting and Equity Valuation

• Forecasting Methods

- Review of forecasting methods

- Macro forecasting

- Linear methods

- Review of historical performance

- Relationship between company and financial strategy

- Identifying and forecasting key drivers

- Linkages and modeling problems

• Reviewing Performance and Adding a Forecast.

Day Three

The Case Template and Deriving Forecast

Financial Statements.

• Free Cash Flows

- Derivation of free cash flow

- Checking model results and redefining forecast

- Reasonableness of forecast and results.

- Adding Free Cash Flow to the Model.

- Cost of Capital:

- Alternative theories – bonds and arbitrage pricing theory

- Capital Asset Pricing Model constituents

- 0pp0Discussion and agreement on WACC inputs

- Asset and equity betas and risk

- Mathematical derivation

• Deriving Beta from Data and Adding WACC to Case

- Initial Equity Valuation:

- Methods of adding terminal value

- Producing an equity valuation

- Comparison to existing share price

• Adding Equity Valuation to the Template.

Risk, Targeting and Other Layers

• Alternative Cash Flow Valuation
• Time varying WACC
• Adjustments to value
• Adjusted Present Value (APV) method
• Existence and addition of financial and operational synergies
• Reconciliation to economic profit 
• Adding APV to the Template

Risk and Sensitivity

• Understanding of risk and multiple answers
• Sensitivity and tables
• Creating sensitivity graphs
• Scenario planning based on economic climate
• Alternative scenario methods

Day Four

Testing the Models with Different Sensitivity and Risk Matrices

• Optimum Structure and Targeting
• Achieving a target valuation
• Goal seeking method
• Testing valuation with leverage and structure
• Targeting the Case to Improve Valuation Sensitivity
• Management Reporting and Model Review:
• Management reporting and summary
• Suggestion for other improvements to the valuation model
• Final audit

Day Five

• Help and user assistance
• Securing and protection
• Documentation and maintenance.
• Application of macro to financial models 
• Revision

Note: Available as Classroom Training as Well as Online Training